US Cities Present Vastly Different Timelines for First-Time Homebuyers to Save Down Payments

The path to homeownership in the United States varies dramatically by location, with a new analysis indicating that first-time buyers in some of the nation's most expensive cities face decades-long waits to save for a down payment, while those in more affordable markets can achieve the goal in a matter of years.

According to an analysis by Rocket, a household in New York City could need more than 65 years to save for the median down payment of $265,000. This contrasts sharply with Warren, Michigan, where a typical household could save enough in just three years. Detroit buyers would need nearly four years.

Other major markets also present significant challenges. San Francisco requires an estimated 57 years for a $400,000 median down payment, and Los Angeles would take 41.5 years to save for its $170,500 median first-time buyer deposit. These lengthy timelines are attributed not only to high home prices but also to larger down payment percentages required in these areas, with New York City first-time buyers typically putting down 30 percent of the purchase price.

Conversely, more affordable markets show significantly shorter savings periods. Virginia Beach, Fort Worth, and Indianapolis are estimated at around 4.3 to 4.4 years. Milwaukee requires approximately 4.4 years, and Jacksonville takes about 4.7 years.

In Warren, Michigan, the median first-time buyer down payment is $8,797, representing 5 percent of an estimated $175,940 home price. Detroit's median down payment is $7,600 on an implied $152,000 home, though the median household income is lower at $39,209.

Chen Zhao, Redfin's head of economic research, noted that local home prices are influenced by local incomes, leading to faster down payment accumulation in more affordable markets. Rocket's chief business officer, Bill Banfield, advised prospective buyers to research typical deposit requirements in their local areas rather than assuming a standard 20 percent down payment.

Banfield also pointed out that down payments as low as 5 percent to 6 percent are common for conventional loans in some markets, and many first-time buyers may qualify for programs that enhance affordability.

In New York City, where high prices necessitate longer saving periods, Redfin agent Jason Warner observes first-time buyers often in their late 30s and early 40s. In Detroit, Redfin premier agent Anne Loehr stated that most first-time buyers she assists put down 5 percent.

Beyond the down payment, additional closing costs and fees can add thousands of dollars to the total cash needed. Higher mortgage rates can also compel buyers to increase their down payments to ensure manageable monthly payments within lending guidelines.

Redfin's research estimates that a median-income household would need approximately $159,000 in cash to purchase a typical U.S. home while keeping monthly housing costs below 28 percent of gross income. This figure can rise significantly in expensive markets like San Jose, where an estimated $1.15 million in total cash might be needed for a typical home purchase.